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yes £3000 - £4500 purchase price , sorry for the confusion .
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I'm assuming you're self employed also? Depending on your needs and type of business a van may allow you to offset your full motoring costs against tax.
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As the car would be used for business use I can claim back 45p per mile against tax ( 45p covers the cost of fuel, insurance , repairs ) .
Yes you claim up to 45p per mile against tax, that actually means you end up with only 9p per mile extra in your pocket if you are a lower rate tax payer, or sme. Over 10k in a tax year and it drops to 25p or 5p/mile in your pocket.
You cannot cover the the cost of fuel, insurance and repairs on 9p per mile, never mind depreciation incurred due to business mileage which you choose to ignore.
I fully expect the usual old timer(s) to respond and try and convince us that they could holiday in the Seychelles every year had they been paid 45p per mile, but I expect the op is running his own business and thats quite different.
Dont forget that full, detailed,accurate mileage records need to be kept. The penalties are high for false claims.
Edited by brum on 25/05/2017 at 19:03
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I'm not entirely sure how you turn 45p per mile into 9p, or turn 25p into 5p. Could you enlighten me ?
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I'm not entirely sure how you turn 45p per mile into 9p, or turn 25p into 5p. Could you enlighten me ?
Basic rate of income tax is 20%.
20% of 45p is 9p...
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I'm not entirely sure how you turn 45p per mile into 9p, or turn 25p into 5p. Could you enlighten me ?
Basic rate of income tax is 20%. 20% of 45p is 9p...
It doesn't work like that.
Lets say you do 1,000 business miles per annum. The approved rate is 45p per mile, so usually your employer will pay you 45p *1000 = £450.
If, for example, your employer only pays 20p per mile, and gives you a cheque for £200, then you can claim the entire amount of the remainder off your usual tax bill (from the rest of your earnings), so, if your normal tax bill was £5000, you would reduce that by £250.
If your employer pays absolutely zero mileage allowance, then you can claim the full £450 as tax relief.
Either way, you'd end up with the full £450 in your pocket, or £450 off your tax bill.
The only way in which it might be different is if your employer pays MORE than the approved rate. So if they pay £1 per mile, and give you a cheque for £1000, then the additional £550 is treated as part of your income, and taxed accordingly (20%, higher rate, etc)
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I'm not entirely sure how you turn 45p per mile into 9p, or turn 25p into 5p. Could you enlighten me ?
Basic rate of income tax is 20%. 20% of 45p is 9p...
It doesn't work like that.
Lets say you do 1,000 business miles per annum. The approved rate is 45p per mile, so usually your employer will pay you 45p *1000 = £450.
If, for example, your employer only pays 20p per mile, and gives you a cheque for £200, then you can claim the entire amount of the remainder off your usual tax bill (from the rest of your earnings), so, if your normal tax bill was £5000, you would reduce that by £250.
If your employer pays absolutely zero mileage allowance, then you can claim the full £450 as tax relief.
Either way, you'd end up with the full £450 in your pocket, or £450 off your tax bill.
The only way in which it might be different is if your employer pays MORE than the approved rate. So if they pay £1 per mile, and give you a cheque for £1000, then the additional £550 is treated as part of your income, and taxed accordingly (20%, higher rate, etc)
The assumption I'm making from the limited information we have is that the OP is self employed and wants to claim his business motoring expenses against tax and not as an employee claiming a mileage allowance. www.litrg.org.uk/tax-guides/employed/employment-be...r-
Edited by SLO76 on 25/05/2017 at 21:53
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"Either way, you'd end up with the full £450 in your pocket, or £450 off your tax bill."
No, you wouldn't. The £450 in the example is an allowable expense against salary or profit.
Your chargeable income would be reduced by £450, thus your tax saving would be £450 @ your rate of tax (say 20%) = £90.
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Just to clarify , I am a self employed and only have access to my personal car for transport.
I did look into a small van but the insurance costs ,and the possibility of losing my No claims bonus ( if i was to revert back to car) put me off .
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Just to clarify , I am a self employed and only have access to my personal car for transport.
I did look into a small van but the insurance costs ,and the possibility of losing my No claims bonus ( if i was to revert back to car) put me off .
Used vans are a minefield anyway. Most firms and sole traders hang onto them until they're no longer economically viable. Some fleets offload earlier and ex BT/NHS stuff are widely regarded as the best maintained and least abused. Too many are unfortunately fitted with PSA's notorious 1600 diesel of doom or Fiats 1250 do you feel lucky diesel.
I usually bought new with vans but after a pig of a Renault Kangoo 1.5 dci I bought a used ex NHS fleet VW Caddy SDi that turned out to be an outstanding wee van. I sold it when I flogged the business and got top dollar for it.
Despite being able to claim more money back you'd still be better buying a used car instead.
Just one question now. Where abouts are you located?
Edited by SLO76 on 26/05/2017 at 00:32
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I'd shortlist
Toyota Avensis 1.8 petrol Estate.
Mazda 6 2.0 Petrol Estate
Skoda Octavia 1.6 petrol Estate
Vauxhall Astra J 1.6 petrol Estate
Ford Focus Mk II Estate with the Yamaha designed 1.6 petrol or Mazda 1.8 petrol.
Ford Mondeo Estate 2.0 petrol. Lovely big thing but a bit greedy.
I'd forget diesel at this money and at your mileage, it's much more complex and almost guaranteed to go expensively wrong at some point which will wipe out the small annual fuel saving. As a workhorse you probably would struggle to better the big Avensis, the 1.8 petrol is pretty good on fuel and there's always demand for an older Toyota Estate.
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I'd shortlist Toyota Avensis 1.8 petrol Estate. Mazda 6 2.0 Petrol Estate Skoda Octavia 1.6 petrol Estate Vauxhall Astra J 1.6 petrol Estate Ford Focus Mk II Estate with the Yamaha designed 1.6 petrol or Mazda 1.8 petrol. Ford Mondeo Estate 2.0 petrol. Lovely big thing but a bit greedy. I'd forget diesel at this money and at your mileage, it's much more complex and almost guaranteed to go expensively wrong at some point which will wipe out the small annual fuel saving. As a workhorse you probably would struggle to better the big Avensis, the 1.8 petrol is pretty good on fuel and there's always demand for an older Toyota Estate.
I want to like the Mazda 6, but when you look at owner reviews on this site, it's a bit hit or miss, and I'm not just talking about the diesels which we know have had a bad reputation. Shame as the car seems good handling wise and the seat folding mechanism is clever and efficient.
They seem to have faults that just don't happen with the Avensis, boring as it is.
What about MPV's such as the Verso and Grand C max? These have plenty of space but are easier to park in small areas due to being shorter but taller.
When I look at the possibility of a used van for my business, I agree with you. Great load space, but some of the diesels are like ticking time bombs and they've usually been used hard. Besides the fact that being window less at the back shout's "I've got valuable tools in here", even if you haven't.
If you can get away with it, a big estate or MPV is the best alternative.
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"I want to like the Mazda 6, but when you look at owner reviews on this site, it's a bit hit or miss, and I'm not just talking about the diesels which we know have had a bad reputation. Shame as the car seems good handling wise and the seat folding mechanism is clever and efficient.
They seem to have faults that just don't happen with the Avensis, boring as it is."
Got to agree, they're much nicer to drive than the Avensis and better looking but they're not quite as robust. The engines and gearboxes are generally very long lived though, it's usually minor points that let them down. A good well maintained example would still be on my shortlist though.
As for the small MPV's the Verso, they're good but boot space with the seats in place isn't that impressive so they're not always the best workhorses.
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"Either way, you'd end up with the full £450 in your pocket, or £450 off your tax bill."
No, you wouldn't. The £450 in the example is an allowable expense against salary or profit.
Your chargeable income would be reduced by £450, thus your tax saving would be £450 @ your rate of tax (say 20%) = £90.
Yep - I agree with that: when I worked as a contract worker during the recession, I could only claim (being effectively self-employed like the OP) the tax back on fuel used as part of my work duties at 9p/mile for the 20% tax bracket and 18p/mile in the 40% bracket.
Its similar if your employer (working as a permanent employee, not self-employed) pays you less than the tax-free amount the government allows:
Firm pays you 40p per mile - you can claim 5p x 0.2 (for the 20% tax band), i.e. 1p per mile extra on the difference between the rate you get and the tax-free rate, so you end up with 41p per mile.
I would say to the OP to buy a car that is very reliable over the long term with an effective 'bullet-proof' petrol engine that is reasonably economical and (as far as possible), hardy bodyshell, minimal gizmos and decent mechanicals/electricals, forget about appearances and go for the one you feel most comfortable driving. A major engine component failure will be both very expensive to fix, far more than fuel savings if you, say, bought a diesel-engined car.
A proven (stamped books are useless and can be forged - check with the manufacturer or ask for receipts if its a private buy) main dealer FSH including dealing with issues promptly (i.e. issues arising at a service aren't left for years until it becomes an MOT failure and/or leads to other issues - that implies little regard for the health of the car). Don't go for an ultra low mileage car, whatever its type - better to go for one that's a bit above average, as long as its been well cared for, as cars like being used (especially where brakes are concerned).
Whatever you look at, have a good look in HJ's Reviews/Car-by-Car section in detail, especially in the 'good and bad' subsections. Also look at reviews of similar cars from the same make, particularly if they share the same engine - some lesser known cars may appear to be ok on reliability, but that may be due to less reviews because of lower numbers of owners - so check related cars (many makes share engines/components - ask if you're not sure). Makes sure you get a decent length test drive on a variety of roads and speeds, so you are comforable about making a decision - have a look at HJ's 'Advice' area for more tips. Don't feel pressured into buying - there's many decent second-hand cars out there to choose from, so make the time (don't hurry) to make an informed choice.
Best of luck.
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I did this for years. The HMRC mileage allowance for using your own car for business is TAX FREE!!!!!!!!
You get 45p per mile for the first 10K and 25 p per mile after that. QED.
Buy a cheap, reliable vehicle that returns excellent fuel economy, is cheap to repair and then runit and run it and run it etc etc. No tax liabiltiy.
It actually improves your personal tax position because your Persoanl Allowance (tax code) remains undiminished by benefit in kind for running a company car.
Cheers Concrete
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I did this for years. The HMRC mileage allowance for using your own car for business is TAX FREE!!!!!!!!
You get 45p per mile for the first 10K and 25 p per mile after that. QED.
Buy a cheap, reliable vehicle that returns excellent fuel economy, is cheap to repair and then runit and run it and run it etc etc. No tax liabiltiy.
It actually improves your personal tax position because your Persoanl Allowance (tax code) remains undiminished by benefit in kind for running a company car.
Cheers Concrete
Only if you are an employee of a firm, not if you work for yourself (as the OP does), when you only get the tax back (20, 40 or 45%) on the mileage rate. Better than nothing, but not great. Its those unscrupulous employers (as one of mine was) that pay less than the tax-free rates that need publicising - one of mine only allowed 40p per mile but only for the first 4k miles, then 25p per mile thereafter: as such, it wasn't worth me using my car for business miles when I got near the 4k mark. I didn't ask at the interview and was a valuable lesson learned (it turned out they were a realy poor company in many other ways).
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Hello Engineer Andy, it is by no means certain the OP is self employed although I can see how the impression was formed. Even so, most SE people these days form a limited company that employs them. In this case the company can pay the OP the HMRC rate or any other rate if it so deires. Higher rate would be taxable on the difference, lower rate would not. It needs clarifying by the OP.
Cheers Concrete
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Hello Engineer Andy, it is by no means certain the OP is self employed although I can see how the impression was formed. Even so, most SE people these days form a limited company that employs them. In this case the company can pay the OP the HMRC rate or any other rate if it so deires. Higher rate would be taxable on the difference, lower rate would not. It needs clarifying by the OP.
Cheers Concrete
It does, as the difference between the two is huge.
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The OP confirmed self employed above on 25/05...
Andy is right, if SE all cash is coming your way, and the only advantage to the mileage rate is reduction of tax bill, so net gain is only the tax saved.
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The OP confirmed self employed above on 25/05...
Andy is right, if SE all cash is coming your way, and the only advantage to the mileage rate is reduction of tax bill, so net gain is only the tax saved.
Maybe you read something I didn't. I can see no confirmation that the OP is self employed. As already pointed out; if self employed and a limited company then it is easy to do.
However, self employed or not, the tax advantage is huge. The 45p per mile HMRC tax free allownace for business miles easily covers running a suitable vehicle. I did this for over 12 years with my last company and I can assure you I am correct. You need to be aware of certain matters but it pays off. As for the Personal Allowance (Tax Code) it makes another huge difference without the deduction for Benefit in Kind (BIK). It is a win win situation if you set it up correctly.
Cheers Concrete
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25/05 @ 22.38 OP Wrote "Just to clarify , I am a self employed and only have access to my personal car for transport."
You've missed the point about the tax implication.... your self employed, you earn say £100 - pay tax at 20% so you get £80 in your pocket. In this you drive 100 miles, so you can claim £45 in mileage allowance, you then pay tax on the remainder, 20% of £55 = £11, so you have £89 in your pocket - you've only gained £9 - ie the 20% tax you've saved on the £45..... When you're SE, LTD co or not, the mileage 'allowance' comes out of the money you have been paid / generated - it's not like being salaried where it comes on top of your income and you get the full benefit of the 45p/mile....
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